Investment distortions and the value of the government's tax claim

D. Kreutzmann, S. Sievers, C. Mueller, Applied Financial Economics 23 (2013) 977–989.

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Journal Article | Published | English
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Abstract
This study integrates the government in the context of company valuation. Our framework allows to analyze and to quantify the risk-sharing effects and conflicts of interest between the government and the shareholders when firms follow different financial policies. We provide novel evidence that firms with fixed future levels of debt might invest more than socially desirable. Economically, this happens if the gain in tax-shields is big enough to outweigh the loss in the unlevered firm value. Our findings have implications for the practice of investment subsidy programs provided by the government to avoid fostering investments beyond the socially optimal level.
Publishing Year
Journal Title
Applied Financial Economics
Volume
23
Issue
11
Page
977-989
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Kreutzmann D, Sievers S, Mueller C. Investment distortions and the value of the government’s tax claim. Applied Financial Economics. 2013;23(11):977-989. doi:10.2139/ssrn.1433277
Kreutzmann, D., Sievers, S., & Mueller, C. (2013). Investment distortions and the value of the government’s tax claim. Applied Financial Economics, 23(11), 977–989. https://doi.org/10.2139/ssrn.1433277
@article{Kreutzmann_Sievers_Mueller_2013, title={Investment distortions and the value of the government’s tax claim}, volume={23}, DOI={10.2139/ssrn.1433277}, number={11}, journal={Applied Financial Economics}, publisher={Taylor \& Francis}, author={Kreutzmann, Daniel and Sievers, Sönke and Mueller, Christian}, year={2013}, pages={977–989} }
Kreutzmann, Daniel, Sönke Sievers, and Christian Mueller. “Investment Distortions and the Value of the Government’s Tax Claim.” Applied Financial Economics 23, no. 11 (2013): 977–89. https://doi.org/10.2139/ssrn.1433277.
D. Kreutzmann, S. Sievers, and C. Mueller, “Investment distortions and the value of the government’s tax claim,” Applied Financial Economics, vol. 23, no. 11, pp. 977–989, 2013.
Kreutzmann, Daniel, et al. “Investment Distortions and the Value of the Government’s Tax Claim.” Applied Financial Economics, vol. 23, no. 11, Taylor \& Francis, 2013, pp. 977–89, doi:10.2139/ssrn.1433277.

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